PayPal to tap dormant capital markets

MattAndrejczak

PALO ALTO, Calif. (CBS.MW) -- Online payment provider PayPal is one of the few firms ready to test the dormant initial public offering market, which saw no deals in the month of September following the aftermath of the terrorist attacks.

Palo Alto, Calif.-based PayPal, whose services enable businesses and customers to send and receive secure online payments via e-mail, filed to raise up to $80.5 million on Friday. It will be taken public by underwriters Salomon Smith Barney, Robertson Stephens and William Blair & Co.

It is only one of two companies to file IPO plans since the Sept. 11 terrorist attacks. Oil refining firm Premcor is seeking to tap the market for as much as $300 million in its deal. See full story.

PayPal, a popular source of payments on Internet auction sites such as EBay
EBAY, +1.53%
plans to use its IPO proceeds for capital expenditures and other general corporate purposes. It has filed for the proposed Nasdaq ticker symbol, "PYPL."

Like many of the high-flying technology companies of yesteryear, PayPal aims to stir up enthusiasm for its public offering despite its extreme lack of profitability. It lost $169.5 million on revenue of $14.5 million in 2000 and expects to report a net loss in 2001 as well.

Whether or not PayPal will ever become profitable depends on consumer acceptance of making payments on the Internet, the company said in its filing with the Securities and Exchange Commission. It generates revenue primarily from transaction fees.

One of PayPal's biggest backer is Providian Financial, the No. 5 issuer of bankcards in the United States. Providian invested $10 million in the company earlier this year.

PayPal said it plans to make a big push into the small business market, where its sees significant opportunities to offer its payment services to more than 22 million companies that have generated an aggregate of $1.6 trillion in annual sales.

As of Sept. 1, PayPal had 10 million users, consisting of 2 million business accounts and 8 million personal users. Its account-based system is used in 36 countries.

One of its biggest competitors is EBay Online Payments, formerly known as Billpoints.

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